CFPB Investigates Junk Fees, Proposes New Rules for Mortgage Servicers

The Consumer Financial Protection Bureau (CFPB) has proposed a rule aimed at requiring mortgage servicers to offer more assistance to struggling homeowners before proceeding with foreclosures. This initiative, announced on July 10, seeks public comments until September 9.

“When struggling homeowners can get the help they need without unnecessary obstacles, it is better for borrowers, servicers, and the economy as a whole,” said CFPB Director Rohit Chopra. “The CFPB’s proposal would reduce avoidable foreclosures and make the mortgage market more resilient during future crises.”

The proposed rule mandates that mortgage servicers exhaust all possible assistance options or confirm that the borrower has stopped communicating before moving forward with foreclosure. Additionally, it allows servicers to assess borrowers' eligibility for each form of assistance individually, bypassing the need for a complete application that includes information for all available options.

A key aspect of the proposed rule is the requirement for servicers to provide more personalized notices to borrowers who miss payments. These notices will include details about the loan investor, available assistance, and actions the borrower can take. Furthermore, servicers must deliver these improved notices in both English and Spanish and offer mortgage assistance communications in the same language as the marketing materials sent to the borrower. They are also required to provide oral interpretation services during phone calls with borrowers.

The CFPB is also seeking public input on various other topics, including approaches to ensure servicers furnish accurate and consistent credit reporting information for borrowers undergoing assistance review.

In a related effort, the CFPB announced in May that it is investigating junk fees that inflate mortgage closing costs. The regulator is soliciting public comments on which fees are subject to competition, how fees are determined, who benefits from them, how they are changing, and their impact on consumers.